Global bond rout: Here's what investors and experts are saying

The Treasury rout later retreated on a cooler-than-expected US private payrolls report that helped Wall Street rebound from previous day's losses.

A rout in world's biggest bond markets deepened early on October 4, with US benchmark yields hitting fresh 16-year highs. The rout later retreated on a cooler-than-expected US private payrolls report that helped Wall Street rebound from the previous day's losses.

Asian shares on October 5 rebounded from 11-month lows as a plunge in oil prices and softer U.S. labour data helped pull Treasury yields off 16-year peaks.

Europe is set to extend the rally, with EUROSTOXX 50 futures rising 0.5 percent and FTSE futures up 0.4 percent.

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In the United Kingdom, the yield on 30-year bonds reached 5 percent this week, highest in two decades.

Yields on German long-dated bonds are back to levels last seen during the 2011 European debt crisis

Yields on Italy’s 10-year bonds hit 5 percent on October 5, highest since 2012.

Here's what investors and experts have to say:

In an interview to Bloomberg, Bill Gross, co-founder and former chief investment officer at Pacific Investment Management Company, said individuals owning hundreds of billions of dollars worth of bond ETFs has been “spooked” by recent losses and are “joining the crowd in terms of selling."

“We are seeing a little bit of oversold market” as 10-year Treasury yields approach 5 percent, he added.

He said that 10-year yields at 5 percent would provide decent but not great value since inflation remains elevated.

On ETF investors Gross said calling them modern day vigilante may be "a little bit of a stretch,” but their selling, has been significant enough to move the market.

“What I see are these smaller vigilantes joining the Treasury and the Fed in terms of negative pressure," he said.

Also Read | Global bond rout deepens before receding on relief rally

Kim Rupert, managing director of global fixed income at Action Economics, said the bond rally, whose price moves inversely to yield, was likely short-lived as the market's next focus would be the September unemployment report on October 6.

"The sell-off has been really dramatic. It's been rapid. It's been huge. The market was so over-sold that it was looking for a catalyst to rally on and found it in ADP," Rupert added.

Charles Robertson, head of macro strategy at FIM Partners said, “The selloff in US bonds is where the risk is coming from - risk to US equities, risk to low-rated emerging-market credits, and indirectly, a risk for global equities.”

Also Read | Emerging market bond yields are sending a worrying signal

On emerging markets (EM) bonds, Robertson said, “Pricing is nowhere near as extreme as in 2008-09, but EM bonds do become more attractive the higher US yields go."

Rhys Williams, chief strategist at Sprouting Rock Asset Management said, "ADP is the canary in the coal mine that things are slowing. The upcoming job reports are going to be less robust than the previous few months."

(With agency inputs)